What does the current Brexit climate mean for the upcoming Budget?
Are the UK government finances as dire as many it perceive it to be?
The Chancellor has been a fierce critic of Brexit since day one and his prominent position as a Remainer has brought much criticism from fellow party and cabinet members. The Chancellor has distributed statistics from the Treasury that frequently state the distinct negatives on the economy of any kind of so-called Hard Brexit. Unsurprisingly, as the economy has appeared fairly resilient to Brexit recently, and I recognise that the markets have been susceptible to statements about the Brexit negotiations, however, considering the mass uncertainty over the future relationship between the EU and Britain, the economy is performing well.
Therefore, despite the dire concerns of the Treasury that Brexit would be a detriment to the economy, the Chancellor appears to be unable to eat his cake and have it at the same time. Yet on the brighter side, that means that the economy is in a stronger position than expected in statements and therefore that there is more money for the Chancellor to spend.
We have heard that May has promised an extra £20bn a year for the NHS, something that might potentially require an increase in taxes to fund. Furthermore, as the Treasury estimated that Brexit would impact the British economy more than it has, there are reserves within the budget for greater spending – as the pound decreases in value, interest repayments increase in foreign currency, however, the lack of devaluation of the pound means that surplus can now be carried into the October Budget.
To almost reinforce the current positive state of government finances, the budget deficit is at its lowest since the financial crash and the £15.4bn Brexit buffer can be accessed by the Chancellor for the upcoming Budget and this could mean that austerity, as Mrs May announced at the Tory Party Conference earlier this month, could indeed be over.
However, on a more disheartening final note, I do want to make it clear that general government finances are not in good shape, government spending to GDP is equivalent to Estonia and Slovakia, showing the government isn’t spending nearly enough in public services – something that certainly needs improving. There are numerous ways in which we can spend £9.4bn net contribution to the EU but there are two that, personally, are incredibly important to fund. Firstly, the £1.86bn annual contributions to the UK scientific industry are fundamental to the economy with much of the required contributions by the government not being released, it is of paramount concern that the funding from central government is distributed to institutions. Secondly, much of the work the EU Commission does is to regulate the many industries in which the Parliament produces legislation. It must not be forgotten that the UK must now regulate these industries to the extent it deems necessary – potentially in line with much EU regulation – and so funds must be spent on new regulatory bodies by central government. As you can see, funds will be rapidly be distributed amongst the many roles that the EU will no longer perform on behalf of the UK.
So, to summarise, the current finances of the UK look at first glance to be good, however, at closer inspection, it appears government spending is far too low and with only a measly £9.4bn to be returned into government hands annually after Brexit, government spending has to increase otherwise the economy will remain as stagnant as that of Greece. Brexit will free up more funds and so will a smooth and soft Brexit but long term, it seems inconceivable that government spending can continue to be as low as it is today. Furthermore, whether the Chancellor will be supported by his party to carry out his budget is another question entirely.
Anywho, if you enjoyed this post let me know and I can make more - don't worry about my lack of posting, from next week onwards you will see a lot more regular posting from myself which I am sure you will all be looking forward to :)
The Chancellor has been a fierce critic of Brexit since day one and his prominent position as a Remainer has brought much criticism from fellow party and cabinet members. The Chancellor has distributed statistics from the Treasury that frequently state the distinct negatives on the economy of any kind of so-called Hard Brexit. Unsurprisingly, as the economy has appeared fairly resilient to Brexit recently, and I recognise that the markets have been susceptible to statements about the Brexit negotiations, however, considering the mass uncertainty over the future relationship between the EU and Britain, the economy is performing well.
Therefore, despite the dire concerns of the Treasury that Brexit would be a detriment to the economy, the Chancellor appears to be unable to eat his cake and have it at the same time. Yet on the brighter side, that means that the economy is in a stronger position than expected in statements and therefore that there is more money for the Chancellor to spend.
We have heard that May has promised an extra £20bn a year for the NHS, something that might potentially require an increase in taxes to fund. Furthermore, as the Treasury estimated that Brexit would impact the British economy more than it has, there are reserves within the budget for greater spending – as the pound decreases in value, interest repayments increase in foreign currency, however, the lack of devaluation of the pound means that surplus can now be carried into the October Budget.
To almost reinforce the current positive state of government finances, the budget deficit is at its lowest since the financial crash and the £15.4bn Brexit buffer can be accessed by the Chancellor for the upcoming Budget and this could mean that austerity, as Mrs May announced at the Tory Party Conference earlier this month, could indeed be over.
However, on a more disheartening final note, I do want to make it clear that general government finances are not in good shape, government spending to GDP is equivalent to Estonia and Slovakia, showing the government isn’t spending nearly enough in public services – something that certainly needs improving. There are numerous ways in which we can spend £9.4bn net contribution to the EU but there are two that, personally, are incredibly important to fund. Firstly, the £1.86bn annual contributions to the UK scientific industry are fundamental to the economy with much of the required contributions by the government not being released, it is of paramount concern that the funding from central government is distributed to institutions. Secondly, much of the work the EU Commission does is to regulate the many industries in which the Parliament produces legislation. It must not be forgotten that the UK must now regulate these industries to the extent it deems necessary – potentially in line with much EU regulation – and so funds must be spent on new regulatory bodies by central government. As you can see, funds will be rapidly be distributed amongst the many roles that the EU will no longer perform on behalf of the UK.
So, to summarise, the current finances of the UK look at first glance to be good, however, at closer inspection, it appears government spending is far too low and with only a measly £9.4bn to be returned into government hands annually after Brexit, government spending has to increase otherwise the economy will remain as stagnant as that of Greece. Brexit will free up more funds and so will a smooth and soft Brexit but long term, it seems inconceivable that government spending can continue to be as low as it is today. Furthermore, whether the Chancellor will be supported by his party to carry out his budget is another question entirely.
Anywho, if you enjoyed this post let me know and I can make more - don't worry about my lack of posting, from next week onwards you will see a lot more regular posting from myself which I am sure you will all be looking forward to :)
Comments
Post a Comment
If you have any comments or disagreements with anything said above feel free to let more know :)